Agreement in principle (AIP) is a document that confirms that a lender is willing to lend a certain amount of money to a borrower. It is also known as a decision in principle (DIP) or mortgage in principle (MIP). However, just because you have an AIP does not mean that you are guaranteed to get a mortgage. Unfortunately, sometimes an AIP can be declined, leaving you in an uncertain financial situation.
There are several reasons why an AIP may be declined. One of the most common reasons is that the lender discovers something negative in the borrower`s credit history that was not disclosed in the application. This could be a missed payment on a credit card or loan, or a default on a previous mortgage. Other reasons for AIP decline can include insufficient income, too high debt-to-income ratio, or problems with the property.
In the case of an AIP being declined, it`s important to know that there are options available. The first step is to find out why the AIP was declined. This information should be outlined in the letter you receive from the lender. Once you know the reason for the declination, you can work on addressing the issue.
If the reason for the decline is related to credit history, it might be possible to improve it by paying off outstanding debts, ensuring payments are made on time, and correcting any errors on your credit report. Additionally, you may want to speak with a financial advisor who can guide you on how to maintain good credit.
For issues related to insufficient income or debt-to-income ratio, you may need to explore alternative mortgage options. For instance, you could increase your down payment or opt for a smaller mortgage.
It`s important to note that even after addressing the issues that caused the AIP decline, there is no guarantee that you`ll get approved for a mortgage. However, it is always best to address the root cause of a decline and work to rectify it, as it will improve your chances of getting approved in the future.
In conclusion, a declined AIP is not the end of the road for your mortgage application. It`s an opportunity to identify issues that may be causing the decline and work on rectifying them. By doing so, you may be able to secure a mortgage that is right for you.